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Author Topic: Britain begins 'quantitave easing'  (Read 2088 times)
afleitch
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« on: March 05, 2009, 03:55:20 pm »
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The Chancellor today gave the Bank of England the go ahead to print money begin quabtative easing ,move money electronically, which is kind of like printing money begin quantative easing.

http://business.timesonline.co.uk/tol/business/economics/article5851028.ece

The Bank of England today embarked on radical moves to “print money” in an aggressive new phase of its battle to combat Britain’s economic slump.

In a landmark decision that marks a determined stepping-up of its fight to end recession and secure a recovery, the Bank confirmed it is beginning a strategy of so-called “quantitative easing”. It is to pump £75 billion of newly created money into the economy over three months.

The ground-breaking step came as the Bank’s rate-setting Monetary Policy Committee also pushed interest rates to yet another historic low.

The MPC ordered another half-point cut in base rate from an existing 1 per cent that was already the lowest in the Bank’s 314-year history to a new all-time low of 0.5 per cent.

But the focus of interest on today's crucial decisions from the Bank was on the move to press ahead with the measures of so-called “quantitative easing”, or “QE”.

These have become necessary in part because with interest rates having been cut so sharply in recent months, the Bank is close to the zero limit below which rates cannot fall.

The green light for today’s drastic action was given by the Chancellor in a letter to Mervyn King, the Bank’s Governor, released today alongside the MPC’s announcement that it will immediately put to work its new powers to pump up the amount of cash and credit flowing in the economy in an attempt to jump-start growth.

The MPC’s decision to press on rapidly with QE, signalled a fortnight ago in minutes of its last meeting, means that it will now begin buying from commercial banks a range of corporate bonds (businesses’ IOUs) and Treasury gilt-edged stock or “gilts” (Government IOUs).

The Bank will pay for these assets by creating new money, electronically, in a modern-day version of running its printing presses.

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Interesting. If you don't mind I'm going to make some space under my bed....


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Sam Spade
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« Reply #1 on: March 05, 2009, 04:02:48 pm »
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Maybe we'll see pound parity with the dollar by the end of the year.  I an now feeling slightly confident about the Euro reaching parity by the end of the year due to this article yesterday (which I didn't post - no need to overkill the bad economic news).

http://www.telegraph.co.uk/finance/financetopics/recession/4939796/Europes-banks-face-a-2-trillion-dollar-shortage.html

Oh, and it's "quantitative easing".  Smiley
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Beet
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« Reply #2 on: March 05, 2009, 04:06:18 pm »
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The pound is not at its lows of January.

This could be a smart move. It's not as if the UK is facing the threat of inflation.

Edit: Although...

"U.K. Fundamentals Unexpectedly Improve, Raising the Outlook for Growth and Inflation

GBPUSD – Service-based activity in U.K. unexpectedly improved in February as the PMI reading rose to 43.2 from 42.5 in previous month amid expectation for a drop to 41.9. The breakdown of the report showed the employment index increased from the previous month while input prices fell to its lowest level since records began in 1996. In addition, the BRC shop price index advanced 1.2% during the month, after rising 0.2% in previous month, which increased the annual growth rate to 1.9%. The BRC quoted rising food prices as the cause behind the pick-up in prices, which was driven by higher import prices but nevertheless, the data has certainly helped to lower the risks for deflation, which could lead the BoE to hold a neutral policy stance going forward as the benchmark interest rate falls close to zero. Meanwhile, a separate report by Nationwide showed that consumer confidence in the region unexpectedly improve in February as the index climbed to 43 from a revised reading of 41 in the previous month, which suggests that households are becoming less pessimistic towards the economy as policy makers utilize all of their available tools to steer the economy out of a deepening recession. Discuss the topic and your trade ideas in the"

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=156419&t=01008643730866469086
« Last Edit: March 05, 2009, 04:13:44 pm by Beet »Logged

afleitch
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« Reply #3 on: March 05, 2009, 04:11:42 pm »
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Oh, and it's "quantitative easing".  Smiley

Spillong has naver been my strang point Smiley
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opebo
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« Reply #4 on: March 05, 2009, 05:01:45 pm »
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Maybe we'll see pound parity with the dollar by the end of the year.  I an now feeling slightly confident about the Euro reaching parity by the end of the year

We can easily avoid the above mentioned parities if we also print money properly.  We can all re-inflate together - it has to be done, SS.  That's how you cure deflations.
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« Reply #5 on: March 06, 2009, 12:31:39 pm »
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Not going to do anything, basically.
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jokerman
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« Reply #6 on: March 06, 2009, 01:17:17 pm »
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Not going to do anything, basically.
Correct.  If the U.S. can't do monetary policy then who can?
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opebo
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« Reply #7 on: March 06, 2009, 03:17:44 pm »
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Not going to do anything, basically.
Correct.  If the U.S. can't do monetary policy then who can?

Why 'can't it?
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Beet
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« Reply #8 on: March 09, 2009, 07:46:55 pm »
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Owwch. Pound down to 1.38 USD today...
Oh and they are issuing notes in all sorts of foreign currencies. How will they pay for all this?

FYI... List of Things Produced in the UK
Medicinal, dental & pharmaceutical preparations …US$8.2 billion (15.3% of Britain to U.S. exports, up 41.8% from 2005)
New & used passenger cars … $5 billion (9.3%, down 12.5%)
Other petroleum products … $3.6 billion (6.8%, up 22.7%)
Crude oil … $2.9 billion (5.5%, down 37.2%)
Civilian aircraft engines … $2.3 billion (4.4%, up 18%)
Goods returned to U.S. then reimported … $2.1 billion (4%, down 0.9%)
Collectibles (e.g. artwork, antiques, stamps) … $1.6 billion (2.9%, up 13.2%)
Materials handling equipment … $1.24 billion (2.3%, up 36.1%)
Precious metals other than gold … $1.237 billion (2.3%, up 36.1%)
Alcoholic beverages other than wine … $1.2 billion (2.2%, up 11.8%)

A wonderful list, wonderful!
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Sam Spade
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« Reply #9 on: March 09, 2009, 11:36:41 pm »
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To use a more understandable phrase, the effects of the type of quantitative easing Britain is attempting to do is the functional equivalent of "pissing into a rainstorm".

I liked the short play because of the investor mindset issue (i.e. mental impact greater than actual) and because there's a really nasty technical pattern that's emerged on the pound over the past month or so that could send the currency crashing down very quickly.

The other issue in Britain - how much of their banking debt (e.g. a lot of the stuff they're backing up) is denominated in foreign currencies (esp. the dollar)?  I don't know off-hand (I know there is a good bit), but if there's a lot of it out there, quantitative easing would make things worse, actually..
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opebo
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« Reply #10 on: March 10, 2009, 05:38:42 am »
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To use a more understandable phrase, the effects of the type of quantitative easing Britain is attempting to do is the functional equivalent of "pissing into a rainstorm".

You mean because there is some other source of newly minted monies than the government?
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k-onmmunist
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« Reply #11 on: March 10, 2009, 11:55:35 am »
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And, as if by magic, the exchange rate to € falls back below 1 - 1.1
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